1. Field of the Art
Systems and methods are disclosed for analyzing fraud and other risks in transactions, determining scores based on those risks, and providing the scores to merchants. Specifically, providing risk scores based on billing and shipping address inconsistencies and other indicators of fraud activity in Card Not Present (CNP) and other transactions to subscribing merchants is described.
2. Discussion of the Related Art
The impact of fraud within a credit card, debit card, or other payment card transaction lifecycle is far reaching, starting from the merchants' submission of the transaction, up through the response provided by an issuer, to tender of a purchased item. In many transactions, banks bear the burden of paying for fraud. If a thief uses a stolen credit card, a merchant's bank or the cardholder's bank pays the cost of the item. However, in CNP transactions, the merchant typically bears the risk of fraud. As more and more purchases are made online and otherwise as CNP transactions, merchants are increasingly exposed to such fraud.
An “issuer” is a bank or other financial institution that offers credit card, debit card, or other payment accounts for use by consumers. The payment accounts are often branded by and subject to rules promulgated by payment service providers, such as Visa. Payment service providers are also known as payment processors and payment networks.
An “acquirer” is a bank or other financial institution that offers payment acceptance services by credit card, debit card, or other payment accounts. Acquirers often contract with merchants to service their credit and other payment card transactions.
A “merchant” is a seller of goods, services, information, etc. A merchant may be one meeting the definition in the Uniform Commercial Code (UCC) or one who merely conducts a transaction as a merchant.
A “payment account” includes credit card, debit card, and other payment card accounts as well as savings, checking, and other financial accounts. Payment accounts can include those for government currencies as well as non-government currencies, such as casino chips, Zynga® dollars, airline/hotel miles, and reward points. Payment accounts can be credited or debited for any valuable consideration.
Currently, issuers can use advanced authorization algorithms developed by payment processing systems to assist in reducing the negative impacts from fraud risk. Due to shifts in liability, merchants are responsible for transactions where the card is used in a CNP situation or where there is no card. A CNP situation can occur when, for example, a customer does not have his card on him at a store but the customer remembers his card number and expiration date and provides them to a store employee. Another CNP situation can occur when a customer purchases something through a merchant's online web site. Because a representative of the merchant is not there to see the card, the customer's card is deemed not present.
An exception to CNP situations in which a merchant does not assume the risk of the transaction is in a verification program by a service provider (e.g. Verified by Visa® authentication). In this situation, the service provider assumes liability for the transaction.
As the CNP segment of transactions continues to grow and experience an increase in fraud, merchants are more anxious to receive assistance from service providers in the form of a product that can be used, in a real-time manner, to aid in reducing fraud.